Major Canadian bank breaks into ETF space

Major Canadian bank breaks into ETF space

A fund aimed at opening the currency market to retail investors will bring Canadian Imperial Bank of Commerce into Canada’s exchange-traded fund industry for the first time.

Horizons ETFs Management Canada Inc. hired CIBC’s Asset Management unit to sub-advise on its Horizons Global Currency Opportunities ETF, an actively managed fund which begins trading July 19 in Toronto under the ticker HGC. The ETF will use financial instruments such as futures and forward contracts to invest in more than 30 global currencies with an emphasis on short-term securities to deliver absolute returns.

“Active currency management has been an area of focus for us over the last number of years," David Scandiffio, chief executive officer of CIBC Asset Management, said by phone from Toronto. The bank, Canada’s fifth-largest lender by assets, doesn’t currently sell any of its own ETFs. "We wanted an efficient way to deliver that active strategy to retail investors."

There are now about 16 ETF providers in Canada, with almost C$103 billion ($80 billion) in assets under management, according to June 30 data from the Canadian ETF Association. Toronto-Dominion Bank, the nation’s second-largest lender, filed with regulators earlier this year to re-enter the ETF marketplace after exiting a decade ago, joining new entrants including Mackenzie Investments, AGF Management Ltd. and CI Financial Corp. WisdomTree Investments Inc. announced July 14 it entered the Canadian marketplace with six ETFs that give investors exposure to U.S., European and international equities.

Scandiffio declined to say if this partnership will lead to CIBC marketing its own ETFs. The lender is in “ongoing discussions” with a number of providers, including Horizons, looking at further products or partnerships, he said.

“Never say never, in terms of launching or creating ETFs," he said. "Certainly we are always looking for efficient and effective ways to deliver mandates to our investors.”

Shares of CIBC were little-changed, down 2 Canadian cents to C$98.47 at 4 p.m. in Toronto trading.
“The $5.3 trillion currency market is one of the largest asset classes in the world and, as we’ve seen clearly over the last two years, FX has the potential to significantly impact returns,” Steve Hawkins, co-chief executive officer of Horizons, said in a statement.

CIBC Asset Management has about C$110 billion in assets. Toronto-based Horizons has more than C$6 billion in assets under management and 73 ETFs listed on the TSX, according to the company.